Ex-economic affairs secretary Shaktikanta Das appointed as new RBI Governor

Ex-economic affairs secretary Shaktikanta Das appointed as new RBI Governor

Courtesy : Nationalist Bureau13/12/2018 08:37

Veteran bureaucrat Shaktikanta Das is appointed as the 25th governor of Reserve Bank of India after Urjit Patel stepped down from the position just a few days ahead of the crucial RBI board meeting on December 14. Das, former economic affairs secretary at India's department of economic affairs, is appointed as governor for a period of three years.

Patel’s surprise resignation on Monday has set off speculation on his possible successors. Although several names of former and serving North Block officials are being tossed around, the government finally settled on Shaktikanta Das. It may be noted that Shaktikanta Das is a retired 1980 batch Indian Administrative Service (IAS) officer of Tamil Nadu cadre. He was a member of the Fifteenth Finance Commission of India, and India's Sherpa to G20 earlier.

However, experts believe that the appointment of a bureaucrat as RBI chief will question the credibility of the institution. If a bureaucrat is made RBI Governor, he won't enjoy the credibility. Markets will see him as a person sent by the govt, former RBI governor D Subbarao told ET Now. Subbarao further said that RBI must continue to enjoy the autonomy on the issue of reserve transfer and liquidity.

It is also to be noted that there have been differences between the North block and the Mint Street over various issues including transfer of RBI reserves. While the government wants RBI to pay a higher dividend to spend in an election year, RBI believes that certain amount of reserve is needed to be kept with RBI to maintain stability in the currency and debt market.

It may be noted that Mint Road and North Block agreed to bury the hatchet, and decided to iron out prickly issues such as governance of state-owned banks, liquidity issues at NBFCs and relaxation of lending curbs on financially stressed banks during the previous board meeting on November 19.

Market experts believe Urjit Patel resigned due to the difference with the government over these issues.

Many banking experts are of the view the liquidity crunch has become a bone of contention between North Block and Mint Road. The finance ministry wants a relaxed PCA so that weak public sector banks can lend more freely. The banking regulator has barred 11 public sector banks from lending under the PCA plan for their worsening financial health until they improve their capital ratios, cut bad loans and become profitable.